CHARLESTON – The West Virginia Supreme Court of Appeals has ruled that a woman’s claims are barred by federal preemption.

On Feb. 3, 2015, Putnam Circuit Court granted Pennsylvania Higher Education Assistance Agency’s motion for summary judgment and Karen Adams then appealed that order to the Supreme Court.

Justice Margaret Workman authored the majority opinion. Chief Justice Menis Ketchum concurred in part and dissented in part and authored a separate opinion.

“Based upon our review of the briefs, legal authorities, appendix record, and upon consideration of arguments of counsel, we find that petitioner’s cause of action is, in part, preempted by federal law and that the remainder of her claims do not survive summary judgment,” the June 3 opinion states. “We therefore affirm the circuit court’s order awarding summary judgment in favor of PHEAA.”

Adams was born and raised in Lakeland, Fla., where she dropped out of school in the 11th grade. She remained in Florida until 1992 and then moved to West Virginia. She is currently receiving social security disability on the basis of severe hypertension, migraine headaches and mild mental retardation with marginal illiteracy.

In 2007, Adams began receiving phone calls from a collection agency regarding a guaranteed student loan procured in her name on Nov. 9, 1986, from Florida Federal Savings & Loan Inc. in the amount of $2,500 for the purpose of attending PTC Institute of Florida.

Adams denied entering into any such loan agreement, executing an application or promissory note bearing her name or attending college or vocational training.

Notwithstanding her disavowal of the loan, Adams entered into a “rehabilitation agreement” wherein she agreed to make nine monthly payments of $86 to remove the “default” status of the loan, which was then owned by the Department of Education as a federally guaranteed Robert T. Stafford Federal Loan. The loan was then sold in a bundle to SunTrust Bank, at which time PHEAA became the loan servicer.

From June 2008 until March 2010, Adams made 21 payments to the loan services and maintains that she entered into the agreement because the servicer threatened to take away her social security if she did not make the payments.

In June 2010, Adams claimed identity theft with regard to the loan application and promissory note and an investigation was launched by PHEAA, during which Adams submitted handwriting samples which were determined to have “similar characteristics” to the signature on the loan documentation and an investigator scheduled a meeting with Adams to facilitate the completion of a police report.

Before the meeting commenced, Adams asked what the penalty would be for filing a false report and indicated instead that she would take responsibility for the loan and pay off the balance, according to the opinion.

In April 2011, Adams began to assert that she was entitled to discharge of the loan because she was disabled and submitted her social security award decision in aid of a disability discharge of her loan, but failed to produce a signed physician’s report of disability, as required, and she retained counsel. She then filed her lawsuit.

PHEAA moved for summary judgment, arguing that Adams’ claims under the West Virginia Consumer Credit and Protection Act were preempted by the FFELP regulations and the circuit court agreed. The appeal followed.

The Supreme Court found that Adams failed to demonstrate that PHEAA made any false representation about the character, extent or amount of her loan as prohibited by West Virginia Code.

“Given that petitioner has failed to adduce evidence of a triable issue regarding whether PHEAA made a false representation regarding her loan, summary judgment is appropriate,” the opinion states.

In his separate opinion, Ketchum states that while he agrees with the result in the case, he disagrees with the majority’s conclusion that a portion of the plaintiff’s claim was not barred by federal preemption.

“In my opinion, there is complete preemption of the West Virginia Consumer Credit & Protection Act…by the regulations of the Federal Family Education Loan Program…” he said.

Ketchum said he agrees with the Ninth Circuit and with the Northern District Court’s ruling in Seals v. National Student Loan Program.

“Therefore, I dissent to the majority’s conclusion that part of the plaintiff’s claim was not barred by federal preemption,” Ketchum said.

Adams is represented by John H. Skaggs of the Calwell Practice LC.

PHEAA is represented by Steven L. Thomas and Charles W. Pace Jr. of Kay Casto & Chaney PLLC.

W.Va. Supreme Court of Appeals case number: 15-0524

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